Quotation of the Day…

Even farm labourers’ income rose during the industrial revolution. As for inequality, in terms of both physical stature and number of surviving children, the gap narrowed between the richest and the poorest during industrialisation. That could not have happened if economic inequality increased.

This particular historical point is important; the general point that it makes is even more so. Throughout the margins of my heavily marked-up copy of Thomas Piketty’s Capital in the Twenty-First Century I scribbled the words “get real.” By this phrase I do not (mostly) mean ‘gimme a break’; rather, this phrase is a shorthand way of suggesting that the monetary figures that parade throughout Piketty’s volume often mask trends in real living standards.

What matters, ultimately, is not how much $$$$ or €€€€ or ££££ or ¥¥¥¥ someone (or some statistical category of someones) earns or has stashed away absolutely, or relatively to how much $$$$ or €€€€ or ££££ or ¥¥¥¥ other people earn or have stashed away. What matters is how well people live according to their own lights and preferences. If the great majority of people, and especially the poor, are living better and better lives – or at least have access to a greater supply of goods, services, and leisure that they can use to live better lives – that fact is powerful evidence that the economy is working well. And that evidence remains relevant and powerful regardless of whatever is happening to the (to use Piketty’s term) “evolutions” of monetary incomes and monetary wealth.

Note that I am not saying that there is no positive connection between monetary income (or wealth) and real living standards. But I am saying that trends in the former are often misleading about trends in the latter. And I’m saying also that only the latter matters.